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loss whose extent it would be claiming as a deduction of its tax

liability, and thus enable the BIR to conduct its own investigation
of the incident leading to the loss. Indeed, the documents
Tambunting submitted to the BIR could not serve the purpose
of their submission without the sworn declaration of loss.
WHEREFORE, the Court AFFIRMS the decision promulgated
on April 24, 2006; and ORDERS petitioner to pay the costs of
suit.
SO ORDERED.
Sereno, C.J., Leonardo-de Castro, Villarama, Jr., and Reyes,
JJ., concur.

SECOND DIVISION

[G.R. No. 175666. July 29, 2013]

MANILA BANKERS LIFE INSURANCE CORPORATION,

petitioner, vs. CRESENCIA P. ABAN, respondent.

SYLLABUS

1. REMEDIAL LAW; APPEALS; FINDING OF FACT OF BOTH

THE TRIAL AND APPELLATE COURTS BINDS THE
SUPREME COURT.— The Court will not depart from the
trial and appellate courts’ finding that it was Sotero who obtained
the insurance for herself, designating respondent as her
beneficiary. Both courts are in accord in this respect, and the
Court is loath to disturb this. While petitioner insists that its
independent investigation on the claim reveals that it was
respondent, posing as Sotero, who obtained the insurance, this
claim is no longer feasible in the wake of the courts’ finding
that it was Sotero who obtained the insurance for herself. This
finding of fact binds the Court.
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2. COMMERCIAL LAW; INSURANCE; ABSENT PROOF OF

FRAUDULENT INTENT ON THE PART OF THE INSURED,
THE INSURER IS NOT ENTITLED TO RESCIND THE
CONTRACT.— With the x x x crucial finding of fact – that
it was Sotero who obtained the insurance for herself –
petitioner’s case is severely weakened, if not totally disproved.
Allegations of fraud, which are predicated on respondent’s
alleged posing as Sotero and forgery of her signature in the
insurance application, are at once belied by the trial and appellate
courts’ finding that Sotero herself took out the insurance for
herself. “[F]raudulent intent on the part of the insured must be
established to entitle the insurer to rescind the contract.” In
the absence of proof of such fraudulent intent, no right to rescind
arises.
3. ID.; ID.; INSURANCE CODE, SECTION 48 THEREOF;
INCONTESTABILITY CLAUSE; AN INSURER IS GIVEN
TWO YEARS — FROM THE EFFECTIVITY OF A LIFE
INSURANCE CONTRACT AND WHILE THE INSURED IS
ALIVE — TO DISCOVER OR PROVE THAT THE POLICY
IS VOID AB INITIO OR IS RESCINDIBLE BY REASON
OF THE FRAUDULENT CONCEALMENT OR
MISREPRESENTATION OF THE INSURED OR HIS
AGENT; AFTER THE TWO –YEAR PERIOD LAPSES, OR
WHEN THE INSURED DIES WITHIN THE PERIOD, THE
INSURER MUST MAKE GOOD ON THE POLICY, EVEN
THOUGH THE POLICY WAS OBTAINED BY FRAUD,
CONCEALMENT, OR MISREPRESENTATION;
RATIONALE.— Section 48 serves a noble purpose, as it
regulates the actions of both the insurer and the insured. Under
the provision, an insurer is given two years – from the effectivity
of a life insurance contract and while the insured is alive – to
discover or prove that the policy is void ab initio or is
rescindible by reason of the fraudulent concealment or
misrepresentation of the insured or his agent. After the two-
year period lapses, or when the insured dies within the period,
the insurer must make good on the policy, even though the
policy was obtained by fraud, concealment, or misrepresentation.
This is not to say that insurance fraud must be rewarded, but
that insurers who recklessly and indiscriminately solicit and
obtain business must be penalized, for such recklessness and
lack of discrimination ultimately work to the detriment of bona
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fide takers of insurance and the public in general. Section 48

regulates both the actions of the insurers and prospective takers
of life insurance. It gives insurers enough time to inquire whether
the policy was obtained by fraud, concealment, or
misrepresentation; on the other hand, it forewarns scheming
individuals that their attempts at insurance fraud would be timely
uncovered – thus deterring them from venturing into such
nefarious enterprise. At the same time, legitimate policy holders
are absolutely protected from unwarranted denial of their claims
or delay in the collection of insurance proceeds occasioned
by allegations of fraud, concealment, or misrepresentation by
insurers, claims which may no longer be set up after the two-
year period expires as ordained under the law.
4. ID.; ID.; ID.; APPLIED TO CASE AT BAR; INSURANCE
POLICIES THAT PASS THE STATUTORY TWO-YEAR
PERIOD ARE TREATED AS LEGITIMATE AND BEYOND
QUESTION, AND THE INDIVIDUALS WHO WIELD THEM
ARE MADE SECURE THAT THEY WILL BE PAID UPON
CLAIM.— [T]he self-regulating feature of Section 48 lies in
the fact that both the insurer and the insured are given the
assurance that any dishonest scheme to obtain life insurance
would be exposed, and attempts at unduly denying a claim would
be struck down. Life insurance policies that pass the statutory
two-year period are essentially treated as legitimate and beyond
question, and the individuals who wield them are made secure
by the thought that they will be paid promptly upon claim. In
this manner, Section 48 contributes to the stability of the
insurance industry. Section 48 prevents a situation where the
insurer knowingly continues to accept annual premium payments
on life insurance, only to later on deny a claim on the policy
on specious claims of fraudulent concealment and
misrepresentation, such as what obtains in the instant case.
Thus, instead of conducting at the first instance an investigation
into the circumstances surrounding the issuance of Insurance
Policy No. 747411 which would have timely exposed the
supposed flaws and irregularities attending it as it now professes,
petitioner appears to have turned a blind eye and opted instead
to continue collecting the premiums on the policy. For nearly
three years, petitioner collected the premiums and devoted
the same to its own profit. It cannot now deny the claim when
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it is called to account. Section 48 must be applied to it with

full force and effect.
5. ID.; ID.; INSURERS CANNOT BE ALLOWED TO COLLECT
PREMIUMS ON INSURANCE POLICIES, USE THESE
AMOUNTS COLLECTED AND INVEST THE SAME
THROUGH THE YEARS, GENERATING PROFITS AND
RETURNS THEREFROM FOR THEIR OWN BENEFIT,
AND THEREAFTER CONVENIENTLY DENY INSURANCE
CLAIMS BY QUESTIONING THE AUTHORITY OR
INTEGRITY OF THEIR OWN AGENTS OR THE
INSURANCE POLICIES THEY ISSUED TO THEIR
PREMIUM-PAYING CLIENTS.— Petitioner claims that its
insurance agent, who solicited the Sotero account, happens to
be the cousin of respondent’s husband, and thus insinuates that
both connived to commit insurance fraud. If this were truly
the case, then petitioner would have discovered the scheme
earlier if it had in earnest conducted an investigation into the
circumstances surrounding the Sotero policy. But because it
did not and it investigated the Sotero account only after a claim
was filed thereon more than two years later, naturally it was
unable to detect the scheme. For its negligence and inaction,
the Court cannot sympathize with its plight. Instead, its case
precisely provides the strong argument for requiring insurers
to diligently conduct investigations on each policy they issue
within the two-year period mandated under Section 48, and
not after claims for insurance proceeds are filed with them.
[I]f insurers cannot vouch for the integrity and honesty of their
insurance agents/salesmen and the insurance policies they issue,
then they should cease doing business. If they could not properly
screen their agents or salesmen before taking them in to market
their products, or if they do not thoroughly investigate the
insurance contracts they enter into with their clients, then they
have only themselves to blame. Otherwise said, insurers cannot
be allowed to collect premiums on insurance policies, use these
amounts collected and invest the same through the years,
generating profits and returns therefrom for their own benefit,
and thereafter conveniently deny insurance claims by questioning
the authority or integrity of their own agents or the insurance
policies they issued to their premium-paying clients. This is
exactly one of the schemes which Section 48 aims to prevent.
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6. ID.; ID.; AN INSURANCE CONTRACT IS A CONTRACT OF

ADHESION WHICH MUST BE CONSTRUED LIBERALLY
IN FAVOR OF THE INSURED AND STRICTLY AGAINST
THE INSURER IN ORDER TO SAFEGUARD THE
INSURED’S INTEREST.— Insurers may not be allowed to
delay the payment of claims by filing frivolous cases in court,
hoping that the inevitable may be put off for years – or even
decades – by the pendency of these unnecessary court cases.
In the meantime, they benefit from collecting the interest and/
or returns on both the premiums previously paid by the insured
and the insurance proceeds which should otherwise go to their
beneficiaries. The business of insurance is a highly regulated
commercial activity in the country, and is imbued with public
interest. “[A]n insurance contract is a contract of adhesion which
must be construed liberally in favor of the insured and strictly
against the insurer in order to safeguard the [former’s] interest.”
APPEARANCES OF COUNSEL

Puyat Jacinto & Santos for petitioner.

Public Attorney’s Office for respondent.

DECISION

DEL CASTILLO, J.:

The ultimate aim of Section 48 of the Insurance Code is to

compel insurers to solicit business from or provide insurance
coverage only to legitimate and bona fide clients, by requiring
them to thoroughly investigate those they insure within two
years from effectivity of the policy and while the insured is still
alive. If they do not, they will be obligated to honor claims on
the policies they issue, regardless of fraud, concealment or
misrepresentation. The law assumes that they will do just that
and not sit on their laurels, indiscriminately soliciting and accepting
insurance business from any Tom, Dick and Harry.
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Assailed in this Petition for Review on Certiorari1 are the

September 28, 2005 Decision 2 of the Court of Appeals (CA) in
CA-G.R. CV No. 62286 and its November 9, 2006 Resolution3
denying the petitioner’s Motion for Reconsideration.4
Factual Antecedents

On July 3, 1993, Delia Sotero (Sotero) took out a life insurance

policy from Manila Bankers Life Insurance Corporation (Bankers
Life), designating respondent Cresencia P. Aban (Aban), her
niece,5 as her beneficiary.
Petitioner issued Insurance Policy No. 747411 (the policy),
with a face value of P100,000.00, in Sotero’s favor on August
30, 1993, after the requisite medical examination and payment
of the insurance premium.6
On April 10, 1996, 7 when the insurance policy had been in
force for more than two years and seven months, Sotero died.
Respondent filed a claim for the insurance proceeds on July 9,
1996. Petitioner conducted an investigation into the claim,8
and came out with the following findings:
1. Sotero did not personally apply for insurance coverage,
as she was illiterate;
2. Sotero was sickly since 1990;
1
Rollo, pp. 3-14.
2
CA rollo, pp. 38-47; penned by Associate Justice Amelita G. Tolentino
and concurred in by Associate Justices Danilo B. Pine and Vicente S.E.
Veloso.
3
Id. at 59-60; penned by Associate Justice Amelita G. Tolentino and
concurred in by Associate Justices Regalado E. Maambong and Vicente S.E.
Veloso.
4
Id. at 48-56.
5
Rollo, p. 6.
6
Id. at 6-7, 71.
7
Records, p. 23.
8
Rollo, p. 7.
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3. Sotero did not have the financial capability to pay the

insurance premiums on Insurance Policy No. 747411;
4. Sotero did not sign the July 3, 1993 application for
insurance; 9 [and]
5. Respondent was the one who filed the insurance
application, and x x x designated herself as the
beneficiary.10
For the above reasons, petitioner denied respondent’s claim
on April 16, 1997 and refunded the premiums paid on the policy.11
On April 24, 1997, petitioner filed a civil case for rescission
and/or annulment of the policy, which was docketed as Civil
Case No. 97-867 and assigned to Branch 134 of the Makati
Regional Trial Court. The main thesis of the Complaint was
that the policy was obtained by fraud, concealment and/or
misrepresentation under the Insurance Code,12 which thus renders
it voidable under Article 1390 13 of the Civil Code.
Respondent filed a Motion to Dismiss 14 claiming that
petitioner’s cause of action was barred by prescription pursuant
to Section 48 of the Insurance Code, which provides as follows:
Whenever a right to rescind a contract of insurance is given to
the insurer by any provision of this chapter, such right must be
exercised previous to the commencement of an action on the contract.
9
Id. at 7, 16.
10
Records, p. 2.
11
Id.
12
Presidential Decree No. 612.
13
Art. 1390. The following contracts are voidable or annullable, even
though there may have been no damage to the contracting parties:
(1) Those where one of the parties is incapable of giving consent to a contract;
(2) Those where the consent is vitiated by mistake, violence, intimidation,
undue influence or fraud.
These contracts are binding, unless they are annulled by a proper action
in court. They are susceptible of ratification.
14
Records, pp. 19-22.
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After a policy of life insurance made payable on the death of the

insured shall have been in force during the lifetime of the insured
for a period of two years from the date of its issue or of its last
reinstatement, the insurer cannot prove that the policy is void ab
initio or is rescindible by reason of the fraudulent concealment or
misrepresentation of the insured or his agent.

During the proceedings on the Motion to Dismiss, petitioner’s

investigator testified in court, stating among others that the
insurance underwriter who solicited the insurance is a cousin
of respondent’s husband, Dindo Aban, 15 and that it was the
respondent who paid the annual premiums on the policy.16
Ruling of the Regional Trial Court

On December 9, 1997, the trial court issued an Order17 granting

respondent’s Motion to Dismiss, thus:
WHEREFORE, defendant CRESENCIA P. ABAN’s Motion to
Dismiss is hereby granted. Civil Case No. 97-867 is hereby dismissed.
SO ORDERED.18

In dismissing the case, the trial court found that Sotero, and
not respondent, was the one who procured the insurance; thus,
Sotero could legally take out insurance on her own life and
validly designate – as she did – respondent as the beneficiary.
It held further that under Section 48, petitioner had only two
years from the effectivity of the policy to question the same;
since the policy had been in force for more than two years,
petitioner is now barred from contesting the same or seeking a
rescission or annulment thereof.
Petitioner moved for reconsideration, but in another Order 19
dated October 20, 1998, the trial court stood its ground.
15
TSN, May 5, 1998, pp. 12-13; records, pp. 95-96.
16
Id. at 15; id. at 98.
17
Records, pp. 55-56; penned by Judge Ignacio M. Capulong.
18
Id. at 56.
19
Id. at 116-119.
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Petitioner interposed an appeal with the CA, docketed as

CA-G.R. CV No. 62286. Petitioner questioned the dismissal
of Civil Case No. 97-867, arguing that the trial court erred in
applying Section 48 and declaring that prescription has set in.
It contended that since it was respondent – and not Sotero –
who obtained the insurance, the policy issued was rendered
void ab initio for want of insurable interest.
Ruling of the Court of Appeals
On September 28, 2005, the CA issued the assailed Decision,
which contained the following decretal portion:
WHEREFORE, in the light of all the foregoing, the instant appeal
is DISMISSED for lack of merit.
SO ORDERED.20

The CA thus sustained the trial court. Applying Section 48

to petitioner’s case, the CA held that petitioner may no longer
prove that the subject policy was void ab initio or rescindible
by reason of fraudulent concealment or misrepresentation after
the lapse of more than two years from its issuance. It ratiocinated
that petitioner was equipped with ample means to determine,
within the first two years of the policy, whether fraud, concealment
or misrepresentation was present when the insurance coverage
was obtained. If it failed to do so within the statutory two-year
period, then the insured must be protected and allowed to claim
upon the policy.
Petitioner moved for reconsideration,21 but the CA denied
the same in its November 9, 2006 Resolution.22 Hence, the
present Petition.
Issues

Petitioner raises the following issues for resolution:

20
CA rollo, p. 46.
21
Id. at 48-56.
22
Id. at 59-60.
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I
[WHETHER] THE COURT OF APPEALS ERRED IN SUSTAINING
THE ORDER OF THE TRIAL COURT DISMISSING THE
COMPLAINT ON THE GROUND OF PRESCRIPTION IN
CONTRAVENTION (OF) PERTINENT LAWS AND APPLICABLE
JURISPRUDENCE.
II
[WHETHER] THE COURT OF APPEALS ERRED IN SUSTAINING
THE APPLICATION OF THE INCONTESTABILITY PROVISION
IN THE INSURANCE CODE BY THE TRIAL COURT.
III
[WHETHER] THE COURT OF APPEALS ERRED IN DENYING
PETITIONER’S MOTION FOR RECONSIDERATION.23
Petitioner’s Arguments

In praying that the CA Decision be reversed and that the

case be remanded to the trial court for the conduct of further
proceedings, petitioner argues in its Petition and Reply 24 that
Section 48 cannot apply to a case where the beneficiary under
the insurance contract posed as the insured and obtained the
policy under fraudulent circumstances. It adds that respondent,
who was merely Sotero’s niece, had no insurable interest in the
life of her aunt.
Relying on the results of the investigation that it conducted
after the claim for the insurance proceeds was filed, petitioner
insists that respondent’s claim was spurious, as it appeared that
Sotero did not actually apply for insurance coverage, was
unlettered, sickly, and had no visible source of income to pay
for the insurance premiums; and that respondent was an impostor,
posing as Sotero and fraudulently obtaining insurance in the
latter’s name without her knowledge and consent.
Petitioner adds that Insurance Policy No. 747411 was void
ab initio and could not have given rise to rights and obligations;
23
Rollo, p. 9.
24
Id. at 69-75.
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as such, the action for the declaration of its nullity or inexistence

does not prescribe. 25
Respondent’s Arguments

Respondent, on the other hand, essentially argues in her

Comment 26 that the CA is correct in applying Section 48. She
adds that petitioner’s new allegation in its Petition that the policy
is void ab initio merits no attention, having failed to raise the
same below, as it had claimed originally that the policy was
merely voidable.
On the issue of insurable interest, respondent echoes the
CA’s pronouncement that since it was Sotero who obtained the
insurance, insurable interest was present. Under Section 10 of
the Insurance Code, Sotero had insurable interest in her own
life, and could validly designate anyone as her beneficiary.
Respondent submits that the CA’s findings of fact leading to
such conclusion should be respected.
Our Ruling

The Court denies the Petition.

The Court will not depart from the trial and appellate courts’
finding that it was Sotero who obtained the insurance for herself,
designating respondent as her beneficiary. Both courts are in
accord in this respect, and the Court is loath to disturb this.
While petitioner insists that its independent investigation on the
claim reveals that it was respondent, posing as Sotero, who
obtained the insurance, this claim is no longer feasible in the
wake of the courts’ finding that it was Sotero who obtained the
insurance for herself. This finding of fact binds the Court.
With the above crucial finding of fact – that it was Sotero
who obtained the insurance for herself – petitioner’s case is
25
Citing Article 1410 of the Civil Code:
Art. 1410. The action or defense for the declaration of the inexistence of
a contract does not prescribe.
26
Rollo, pp. 57-67.
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severely weakened, if not totally disproved. Allegations of fraud,

which are predicated on respondent’s alleged posing as Sotero
and forgery of her signature in the insurance application, are at
once belied by the trial and appellate courts’ finding that Sotero
herself took out the insurance for herself. “[F]raudulent intent
on the part of the insured must be established to entitle the
insurer to rescind the contract.”27 In the absence of proof of
such fraudulent intent, no right to rescind arises.
Moreover, the results and conclusions arrived at during the
investigation conducted unilaterally by petitioner after the claim
was filed may simply be dismissed as self-serving and may not
form the basis of a cause of action given the existence and
application of Section 48, as will be discussed at length below.
Section 48 serves a noble purpose, as it regulates the actions
of both the insurer and the insured. Under the provision, an
insurer is given two years – from the effectivity of a life insurance
contract and while the insured is alive – to discover or prove
that the policy is void ab initio or is rescindible by reason of
the fraudulent concealment or misrepresentation of the insured
or his agent. After the two-year period lapses, or when the
insured dies within the period, the insurer must make good on
the policy, even though the policy was obtained by fraud,
concealment, or misrepresentation. This is not to say that insurance
fraud must be rewarded, but that insurers who recklessly and
indiscriminately solicit and obtain business must be penalized,
for such recklessness and lack of discrimination ultimately work
to the detriment of bona fide takers of insurance and the public
in general.
Section 48 regulates both the actions of the insurers and
prospective takers of life insurance. It gives insurers enough
time to inquire whether the policy was obtained by fraud,
concealment, or misrepresentation; on the other hand, it forewarns
scheming individuals that their attempts at insurance fraud would
be timely uncovered – thus deterring them from venturing into

27
Great Pacific Life Assurance Corporation v. Court of Appeals, 375
Phil. 142, 152 (1999).
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such nefarious enterprise. At the same time, legitimate policy

holders are absolutely protected from unwarranted denial of
their claims or delay in the collection of insurance proceeds
occasioned by allegations of fraud, concealment, or
misrepresentation by insurers, claims which may no longer be
set up after the two-year period expires as ordained under the
law.
Thus, the self-regulating feature of Section 48 lies in the fact
that both the insurer and the insured are given the assurance
that any dishonest scheme to obtain life insurance would be
exposed, and attempts at unduly denying a claim would be struck
down. Life insurance policies that pass the statutory two-year
period are essentially treated as legitimate and beyond question,
and the individuals who wield them are made secure by the
thought that they will be paid promptly upon claim. In this
manner, Section 48 contributes to the stability of the insurance
industry.
Section 48 prevents a situation where the insurer knowingly
continues to accept annual premium payments on life insurance,
only to later on deny a claim on the policy on specious claims
of fraudulent concealment and misrepresentation, such as what
obtains in the instant case. Thus, instead of conducting at the
first instance an investigation into the circumstances surrounding
the issuance of Insurance Policy No. 747411 which would have
timely exposed the supposed flaws and irregularities attending
it as it now professes, petitioner appears to have turned a blind
eye and opted instead to continue collecting the premiums on
the policy. For nearly three years, petitioner collected the
premiums and devoted the same to its own profit. It cannot
now deny the claim when it is called to account. Section 48
must be applied to it with full force and effect.
The Court therefore agrees fully with the appellate court’s
pronouncement that –
[t]he “incontestability clause” is a provision in law that after a
policy of life insurance made payable on the death of the insured
shall have been in force during the lifetime of the insured for a
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period of two (2) years from the date of its issue or of its last
reinstatement, the insurer cannot prove that the policy is void ab
initio or is rescindible by reason of fraudulent concealment or
misrepresentation of the insured or his agent.
The purpose of the law is to give protection to the insured or his
beneficiary by limiting the rescinding of the contract of insurance
on the ground of fraudulent concealment or misrepresentation to a
period of only two (2) years from the issuance of the policy or its
last reinstatement.
The insurer is deemed to have the necessary facilities to discover
such fraudulent concealment or misrepresentation within a period
of two (2) years. It is not fair for the insurer to collect the premiums
as long as the insured is still alive, only to raise the issue of fraudulent
concealment or misrepresentation when the insured dies in order
to defeat the right of the beneficiary to recover under the policy.
At least two (2) years from the issuance of the policy or its last
reinstatement, the beneficiary is given the stability to recover under
the policy when the insured dies. The provision also makes clear
when the two-year period should commence in case the policy should
lapse and is reinstated, that is, from the date of the last reinstatement.
After two years, the defenses of concealment or misrepresentation,
no matter how patent or well-founded, will no longer lie.
Congress felt this was a sufficient answer to the various tactics
employed by insurance companies to avoid liability.
The so-called “incontestability clause” precludes the insurer from
raising the defenses of false representations or concealment of
material facts insofar as health and previous diseases are concerned
if the insurance has been in force for at least two years during the
insured’s lifetime. The phrase “during the lifetime” found in Section
48 simply means that the policy is no longer considered in force
after the insured has died. The key phrase in the second paragraph
of Section 48 is “for a period of two years.”
As borne by the records, the policy was issued on August 30,
1993, the insured died on April 10, 1996, and the claim was denied
on April 16, 1997. The insurance policy was thus in force for a
period of 3 years, 7 months, and 24 days. Considering that the insured
died after the two-year period, the plaintiff-appellant is, therefore,
barred from proving that the policy is void ab initio by reason of
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the insured’s fraudulent concealment or misrepresentation or want

of insurable interest on the part of the beneficiary, herein defendant-
appellee.
Well-settled is the rule that it is the plaintiff-appellant’s burden
to show that the factual findings of the trial court are not based on
substantial evidence or that its conclusions are contrary to applicable
law and jurisprudence. The plaintiff-appellant failed to discharge
that burden. 28

Petitioner claims that its insurance agent, who solicited the

Sotero account, happens to be the cousin of respondent’s husband,
and thus insinuates that both connived to commit insurance
fraud. If this were truly the case, then petitioner would have
discovered the scheme earlier if it had in earnest conducted an
investigation into the circumstances surrounding the Sotero policy.
But because it did not and it investigated the Sotero account
only after a claim was filed thereon more than two years later,
naturally it was unable to detect the scheme. For its negligence
and inaction, the Court cannot sympathize with its plight. Instead,
its case precisely provides the strong argument for requiring
insurers to diligently conduct investigations on each policy they
issue within the two-year period mandated under Section 48,
and not after claims for insurance proceeds are filed with them.
Besides, if insurers cannot vouch for the integrity and honesty
of their insurance agents/salesmen and the insurance policies
they issue, then they should cease doing business. If they could
not properly screen their agents or salesmen before taking them
in to market their products, or if they do not thoroughly investigate
the insurance contracts they enter into with their clients, then
they have only themselves to blame. Otherwise said, insurers
cannot be allowed to collect premiums on insurance policies,
use these amounts collected and invest the same through the
years, generating profits and returns therefrom for their own
benefit, and thereafter conveniently deny insurance claims by
questioning the authority or integrity of their own agents or the
insurance policies they issued to their premium-paying clients.

28
CA rollo, pp. 44-46.
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This is exactly one of the schemes which Section 48 aims to

prevent.
Insurers may not be allowed to delay the payment of claims
by filing frivolous cases in court, hoping that the inevitable
may be put off for years – or even decades – by the pendency
of these unnecessary court cases. In the meantime, they benefit
from collecting the interest and/or returns on both the premiums
previously paid by the insured and the insurance proceeds which
should otherwise go to their beneficiaries. The business of
insurance is a highly regulated commercial activity in the country,29
and is imbued with public interest.30 “[A]n insurance contract
is a contract of adhesion which must be construed liberally in
favor of the insured and strictly against the insurer in order to
safeguard the [former’s] interest.” 31
WHEREFORE, the Petition is DENIED. The assailed
September 28, 2005 Decision and the November 9, 2006
Resolution of the Court of Appeals in CA-G.R. CV No. 62286
are AFFIRMED.
SO ORDERED.
Carpio (Chairperson), Brion, Perez, and Perlas-Bernabe,
JJ., concur.

29
Tongko v. The Manufacturers Life Insurance Company (Phils.),
Inc., G.R. No. 167622, June 29, 2010, 622 SCRA 58, 75.
30
Republic v. Del Monte Motors, Inc., 535 Phil. 53, 60 (2006); White
Gold Marine Services, Inc. v. Pioneer Insurance & Surety Corporation,
502 Phil. 692, 700 (2005).
31
Eternal Gardens Memorial Park Corporation v. Philippine American
Life Insurance Company, G.R. No. 166245, April 9, 2008, 551 SCRA 1, 13.